Introduction to VIRTUAL RETAIL and E.L.S.E., by ELSE Corp

3. Virtual retail will fade the barrier between the digital and physical world, using Technology as an experience enhancer for products and services. © 2016 ELSE Corp S.r.l. The Impact of Virtual Retail 3

5. Now 25% are willing to pay a premium price (+20%) (Deloitte, 2015) 45% spend money on personalization (Forrester, 2015) 45% are comfortable waiting longer to get a personalized product (Deloitte, 2015) “By 2020, 15% of the clothing Americans buy will be customised. That is $35 Bn worth in sales in apparel alone.” Merjin Helle VP SAP America The Future “Hyper-personalisation has started to grow in 2015 and will become a more important part of the customer experience over the next couple of years” Craig Cannon IBM Business Development Manager © 2016 ELSE Corp S.r.l. Luxury Products Customisation: Now and the Future 5

6. “For the next 5 years, I do not see many things happening. In 30/50 years you will be measured by a body scanner, the measurements will be sent to a production facility completely run by computers, the suit will be assembled without any human touch and then it will be sent back for trial. The client will try it on and the suit will be loosen or tighten where the client feels it. The suit will be made using nanotechnology that when connected with the client brain will alter itself without any human intervention. Probably the person that will assist you in store will be just a facilitator totally unaware of fashion trends because, for them, you will look at styles and ideas just from famous bloggers on the social media platforms.” Giovanni Luigi Bordone - SCABAL Brand Ambassador E.L.S.E. is working to reach this scenario many years before this prediction: © 2016 ELSE Corp S.r.l. Made to Measure in 5 to 50 Years 6

7. RETAIL Luxury brands preferred to steer away from technology, fearing it synonymous with mass media, and t h e r e f o r e m a s s - m a r k e t communication and perception. Luxury brands are acknowledging the role that social media and a d v a n c e d , s e n s o r y - l e d technologies play in consumers’ everyday lives, and adapting them to their own purposes with a smart, upscale twist. PAST PRESENT © 2016 ELSE Corp S.r.l. Retail is Changing 7

8. Brands were sticking to traditional ways of manufacturing, based on old technologies and seasonal collections. B r a n d s a r e a p p l y i n g n e w technologies into a traditional scheme, trying to insert Limited Edition Collections. PAST PRESENT MANUFACTURING © 2016 ELSE Corp S.r.l. Manufacturing is Changing 8

9. C u s t o m e r s w e r e a b l e t o experience shopping in a physical store, and they could only buy existing products from the stock. The shopping experience is extended in both, off-line and online channels. Brands recognize the importance of using digital technology in-store to make the shopping experience more appealing. PAST PRESENT SHOPPING EXPERIENCE © 2016 ELSE Corp S.r.l. The Shopping Experience is Changing 9

10. Personalisation was largely the preserve of luxury brands, involving monogram products or observing an item being ﬁnished in-store. Brands cater to consumers’ growing desire for individualism and personal creative expression with customization zones and participatory concepts. PAST PRESENT PERSONALISATION EXPERIENCE © 2016 ELSE Corp S.r.l. The Personalisation Experience is Changing 10

11. The customer’s measurements are taken by a tailor, then a pattern is selected and altered to match the customer’s measures. The customer’s measurements are taken by a MTM retailer (on-line or physically), then a pattern is altered to match customer’s measures and style specs. PAST PRESENT MTM & MTO © 2016 ELSE Corp S.r.l. MTM & MTO is Changing 11

12. Manufacturing: Technology will play an essential role, becoming fundamental in the Industrial Made to Measure processes to provide hyper - personalized products. Customers: Consumer - creators become an integral part of the design process and are able to co - author personalized products; stores and on - line platforms function as studios and labs. Shopping Experience: Brands will deliver tailored products and services, taking the approach of Technology as an experience enhancer. Retail: Virtual retail will play an essential role in omni & consumer relevancy channels, fading the barrier between the digital and physical world. © 2016 ELSE Corp S.r.l. Luxury 3.0 + Virtual Retail Business Model 12

15. © 2016 ELSE Corp S.r.l. Types of Millennial Shoppers (RCE, 2016) 15 Social Shopper The Bargain Hunter Elite Shopper Impulse Buyer Frugal Fannie Around 50% fo consumers are influenced by friends and family when making a purchasing decision. 7.4% of consumers are more likely to buy from retailer’s site when they get a discount code. 47.6% feel more valued when the retailer rewards them with loyalty points. Almost 50% of consumers have made a purchase based on “Suggested Items”. 37.2% are motivated to shop when they need something.

16. 25% are willing to pay a premium price (+20%) (Deloitte, 2015) 45% spend money on personalization (Forrester, 2015) 45% are comfortable waiting longer to get a personalized product (Deloitte, 2015) 216% more likely to be influenced by in - store deeper experiences (Honigman, 2013) © 2016 ELSE Corp S.r.l. Trends: Millennials / HENRYs 16

19. Target Positioning Purpose Value Shopping Form Shopping Influence Added Value Approach HNWI Exclusive Acquiring Brand Spontaneous In - Store Tailored Product Product Based Omni - Channel + Commerce Relevancy Tech as an experience enhancer Tailored Product + Tech + Time Efficiency Considered Back - Story Experience Unique HENRY Luxury 3.0Luxury © 2016 ELSE Corp S.r.l. Luxury & Luxury 3.0 19

20. VirtualDigital Digital Platform Browsing Unidirectional Multi - Channel Best Price Seasonal Collections Product from Stock in 1 Size Virtual Platform Interacting Multidirectional Omni - Channel + Commerce Relevancy Best Products Capsule Collections MTO + MTM Product E.L.S.E provides brands with a new solution, taking them from a traditional e- Commerce model to a cross-platform, virtual commerce solution that they can integrate into any environment to sell personalised capsule collections © 2016 ELSE Corp S.r.l. From Digital to Virtual 20

21. Famous Luxury Brands Fashion Companies & Emerging Designers Fast, Affordable & Trendy Allows experimentation Best product at a competitive price Production comes after payment M T O Prevent retail costs Increases brand awareness Boosts brand’s dynamism Attracts new customers without compromising brand’s exclusivity Increments online competitiveness with price - oriented customers M T O M T M + © 2016 ELSE Corp S.r.l. MTO & MTM + Luxury 3.0: The Advantages 21

23. Loyalty Impact © 2016 ELSE Corp S.r.l. Beyond the First Purchase (1) 23 Loyalty programs are used out of an average of 11.3.7.3 Modify spending habits to maximize points.63% Are more likely to recommend brands with good loyalty programs.66% RCE, 2016.

24. © 2016 ELSE Corp S.r.l. Beyond the First Purchase (2) 24 Demographic Differences Times, millennials are more likely to pay a premium price if they earn loyalty points.1.5 Of millennials don’t mind product recommendations based on purchase history, compared with 30% of boomers. 44% Millennials value special services compared with boomers. + RCE, 2016.

25. © 2016 ELSE Corp S.r.l. Beyond the First Purchase (3) 25 RCE, 2016. Rewards & Redemption Times as likely to defect loyalty programs, the “non - redeemers”. 2 Credit card programs can benefit from retail and online points redemption.+ Of members have never redeemed anything.+25% Program Satisfaction Program satisfaction is steady from last year. 2015/16 Thinks their program fits their brand expectations.23%

26. © 2016 ELSE Corp S.r.l. Beyond the First Purchase (4) 26 Mobile as a Big Advantage Want to interact with the brand via mobile device. Don’t know if a brand mobile app exists.+50% Consumers are interested in mobile to check point balances, read emails, find a store and redeem rewards. RCE, 2016. 44% +

28. 3.3% 1.9% 1.6% 1.2% 0.6% 0.5% 0.4% 0.4% China Turkey Singapore Thailand India Morocco U. A. E. Pakistan Egypt © 2016 ELSE Corp S.r.l. Top Origin Economies of Fakes 28 Hong Kong 63.2% 21.3% 5.6% Rest of the World Data: Trade in Counterfeit and Pirated Goods

29. €17 Billion 363 000 518 281 €8.1 Billion Lost Sales Revenue Lost in the Sector Revenue Lost in Related Sectors Direct Jobs Lost Direct & Indirect Jobs Lost Government Revenue Lost (contributions & taxes) €26.3 Billion 9.7% Data: Office for Harmonization in the Internal Market © 2016 ELSE Corp S.r.l. Counterfeiting Effects in Europe 29

32. 5 Billion 4.5 Billion 4 Billion 3.9 Billion 3.8 Billion Italy Spain United Kingdom Germany France Data: Office for Harmonization in the Internal Market © 2016 ELSE Corp S.r.l. Lost Sales in Numbers 32

36. Initial Payment Virtual Fitting & Cross Sale Final Payment Product Finalisation for initial manufacturing % for tailored manufacturing % € Measures & Information of 3D Avatar Model: #98457 Customer: A. G. Size: 38 Regular Adjust: Points X, Y, T, Z for MTM Virtual Tailoring & Manufacturing MTM & Customisation1 3 5 2 4 6 © 2016 ELSE Corp S.r.l. Virtual Retail Service Delivery Model 36

37. Fashion Brand’s Capsule Collection Brand’s Customers SaaS platform as a bespoke services automation for fashion & luxury brands © 2016 ELSE Corp S.r.l. E.L.S.E. Direct to Consumer Service Delivery Model 37

39. B2BB2C Traditional Response - Store closing - Geo presence revision - New processes Sales Tools & Technology - Window displays - On - line store - 3D Body Scanners - 3D Printers - Interactive tailoring mirror - Holograms - Virtual Consoles - In - Store E - Commerce - CRM Systems Current Scenario - Slowdown in openings - Physical stores are not rentable - Decline in sales - Less sales in mature markets - Slow stock rotation (in some products) Current Trends - 45% of shoppers spend money on personalization - 25% of consumers are willing to pay a premium price (+20%) - 45% are comfortable waiting longer to get a personalized product - Millennials are 216% more likely to be inﬂuenced by in-store touch screen displays Tech Integration © 2016 ELSE Corp S.r.l. Luxury 3.0 & E.L.S.E. 39

40. Each Virtual Capsule collection is comprised of a selection of items that follow the theme or mood of the collection. Each product within the v.c.c. is made up of elements, and each element has it’s own set of possible configurations. © 2016 ELSE Corp S.r.l. Basic Product Customization Logic 40

42. Everyday Luxury Affordable Luxury Accessible Core Premium Core Superpremium Ultra High End Democratic Fashion Brands Bespoke Industrial INDUSTRIAL MADE TO ORDER Margin Volume SmartBrands © 2016 ELSE Corp S.r.l. Ideal Fashion Brand Types for Virtual Retail 42

45. www.else-corp.com © 2016 ELSE Corp S.r.l. 45 Disclaimer Brands’ logos inserted in this presentation belong to their respective owners and ELSE Corp Srl does not claim rights over them. Data and information provided in this presentation belong to public sources of digital access. ELSE Corp Srl has no responsibility for the accuracy of these sources. The pictures that are on this document are copyrighted to their personal owners. The credit is to the owner and in no way we are claiming the right to these photos. The pictures are taken from URL’s on the web and believed to be public.

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